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Budget deadline looms; deal deemed 'doable'

Minnesota leaders closed in Sunday night
on an agreement to fix a $3 billion budget deficit as lawmakers
worked against a midnight deadline to finish the legislative
session.

Senate Majority Leader Larry Pogemiller emerged from a
negotiation session just before 10 p.m. with an upbeat report.

"We're very close. This is very doable. Our biggest issue now
is just technically getting something drafted," Pogemiller said,
reflecting the quick turnaround that would be needed to approve an
agreement before the deadline. He stressed that no formal
settlement with Republican legislators and GOP Gov. Tim Pawlenty
was at hand.

Legislators and Pawlenty traded offers all day as they worked to
resolve the budget gap and figure out if they could tap into a
federal pot of health care money.

If the work wasn't done in time, a special session might be
necessary.

Earlier in the day, Pawlenty asked Democrats to give up a deeply
desired goal of expanding Medicaid health coverage for poor adults
using federal dollars. In exchange, he promised to stop seeking
$114 million worth of cuts to health and welfare programs, assuming
some anticipated federal aid comes through.

Democrats who control the Legislature came back with a
counteroffer that would preserve the option of the Medicaid
expansion when Pawlenty's successor is sworn in next January.

Their offer would involve Pawlenty signing a budget bill passed
shortly after sunrise Sunday. The Legislature would send him a
second bill making adjustments to a state-only health program for
vulnerable adults.

Long dayCraig Lassig/AP

Pawlenty said he hasn't yet vetoed - or even received - the
budget bill. It would ratify most of the spending cuts he made last
year and rely heavily on delayed payments to schools, but it also
contains the controversial health care initiative for the poor
relying on federal money.

The pressure on the players and the stakes for the state were
high.

Without a solution to the deficit by the midnight deadline set
in the state constitution, Pawlenty and lawmakers were looking at
undesirable options:

-They could resume work in a special session, a risky
proposition for legislators eager to hit the campaign trail and
particularly for those seeking higher office. Two gubernatorial
candidates, Kelliher and Republican Rep. Tom Emmer, would face time
and fundraising constraints during a special session.

-Pawlenty, a potential 2012 Republican presidential candidate,
could be forced to deal with an unprecedented cash crunch with
limited tools at his disposal. Some steps could be withholding tax
refunds, delaying state grant awards, putting off construction
projects and possibly canceling contracts with vendors. But
Minnesota's top-notch credit rating would likely suffer, making
future borrowing for construction projects more costly.

Kelliher leaves speaker's postScott Takushi/AP

Republican have been complaining for days about the health care
expansion. Democrats hoped to enroll thousands more low-income
patients in a federally sponsored Medicaid program that required
the state to put up $188 million. In return, an estimated $1.4
billion in federal money could be sent Minnesota's way over the
next few years.

A budget settlement was deemed imperative because the state's
available cash is set to dip below $200 million in the coming weeks
and could drop into the red this summer.

Lawmakers pledged to stay at the Capitol until the final moments
in hopes of a deal. Both houses worked all night Saturday into
Sunday morning and reconvened on Sunday afternoon.

Major elements of the budget bill are likely to be part of a
final deal, if there is one.

It would push off almost one-third of schools' expected aid
checks into the next budget year, forcing short-term borrowing in
some districts and use of reserves in others. The accounting
mechanism would save the state $1.9 billion in the current budget -
$200 million more than was previously counted on.

Governor returns to CapitolMPR Photo/Tim Nelson

By putting the school shift in law, there is some assurance that
districts will get paid back when the state's economic conditions
improve. An aid deferral that Pawlenty attempted on his own last
year offered no such promise. The Minnesota Supreme Court found
earlier this month that the governor exceeded his authority in
making the cuts without lawmakers' approval.